Rostenkowski Isn't Just On Andrew's Mind

23 Aug 2008

Posted by Stan Collender

Andrew's post this morning about Dan Rostenkowski's being attacked by his own constituents after telling them that they would have to pay for their own catastrophic health care coverage isn't just a long-forgotten event from a bygone era. To this day, it's something that members of Congress cite chapter and verse when discussing the budget. Like a story passed down from generation to generation, this includes current representatives and senators, the vast majority of who weren't in office when the event occurred.

I can't tell you the number of times the Rostenkowski incident has been mentioned by members of Congress at meetings I've attended. Usually it's mentioned as a throw away line ("I don't want my constituents chasing me down the street"). But it's also often been the start of a statment ("Dan Rostenkowski found out the hard way what happens when..."). I've heard the story used by Democrats and Republicans, liberals and conservatives, and representatives and senators.

It seems to be a story that elected officials feel most personally. Staff invariably do not raise it first.

Historically, my guess is that it will assume a place right up there with the Whiskey Rebellion that occurred in Pennsylvania in the late 1770s. The picture below shows the incident where a federal tax collector was tarred and feathered, the Revolutionary War equivalent of attacking the limo of the chairman of the Ways and Means Committee.

I suspect that quite a few members of congress will be Rostenkowskied once people understand just how dire the current financial situation has become, and how enormous the potential losses. And well they should be - courage and leadership are nowhere to be found.

Of course public officials should be blamed for the financial fiasco. They're the ones who repealed Glass-Stegall, which is what made it possible for the banking sector to get into the mortgage securitization biz while also setting up a shadow banking system removed from both real regulation and real capital standards. They undid the key protections that had been put in place after the Depression, and this deregulation is a very important contributing cause to the systemic failure we are about to experience. The financial services sector paid them on the order of $417 million in campaign contributions for the repeal of Glass-Stegall and got its money back many times over. The trouble is that the taxpayers are going to have to pay back all that and then some. They'll still have a disfunctional banking sector once the fun and games are finished.

The list of sins is long and deep but you can research GSE reform, encouraging subprime lending, unregulated rating agencies, and all the rest on your own.